Dec 13 – Fed Rate, FOMC & CPI, Let The Real Game Begins!

Posted Wednesday, December 13, 2017 by
Arslan Butt • 3 min read

Good morning, traders.

At last, the most awaited day of the quarter has come. The US FOMC is meeting today to decide the Fed Fund Rate. We all know they are expected to hike the interest rate today. What we don’t know is how this is going to impact the forex, commodity and stock markets. It won’t be a piece of cake to tackle the rate hike shock as there might be dual movements in the market. Let’s look into its potential impacts…

Top Events To Watch Today

Great Britain Pound – GBP

Today at 9:30 (GMT), the Office for National Statistics will be releasing three labor market figures, which include:

Average Earnings Index 3m/y – The change in the price businesses and the government pay for labor, including bonuses. It’s forecasted to be positive at 2.5% vs. 2.2% in the last month.

Claimant Count Change – The change in the number of people claiming unemployment-related benefits over the previous month. It’s expected to be negative 3.3K vs. 1.1K last month. It seems like more people have filed jobless claims than the previous month. 

Unemployment Rate- One of the main measures of economic growth. The BOE looks at it to determine it’s future interest rates. Looking at the forecast, the unemployment rate is expected to drop to 4.2% from 4.3%. This is going to put more pressure on the BOE to become hawkish in their policies.

The US Monetary Policy – How to Trade?

Federal Funds Rate – Releasing at 19:00 (GMT) today. The FED is expected to hike the rate by 25 bp (base point) from 1.25% to 1.50%. The rate hike is coming for the 3rd time in this year.

But now, investor’s real concern is if the Fed’s policymaking will change once Yellen steps down in February and is succeeded by Jerome Powell? 

FOMC Press Conference – After 30 mins of Fed rate decision, investors will be looking to Janet Yellen’s final news conference as Fed chair for any clues about 2018.

Let me remind you few points:

  • During the news, the market will be extremely volatile and totally uncertain. It’s better to wait until the press conference is over to take positions.
  • Before & during the release, most brokers will increase the spread and this could hurt the scalpers. Beware of increased spreads before you enter the market.
  • If you are planning to place pending orders set before the news, think again. There can be dual movement in the market today.

What To Expect From the Dollar?

Initially, the dollar should spike higher on news and then there will be a sudden drop. Beware of reversals in the market.

What To Expect From the Bullion?

Commodities like Gold and Silver are already in selling mode. Perhaps, investors are pricing in the Fed rate hike. We can expect a dip in Gold and Silver on news release. Yet, in the next moment, these could skyrocket.

What To Expect From the Stock Markets?

Indices will be bullish on rate hikes unless the Fed Press Conference says something unfavorable, such as economic growth is sluggish, and slags in labor market.

Best Practice to Follow

What I normally do is to use radio or online tv channels to see this kind of news as it’s the fastest way to get the information without losing sight of the charts. But don’t get fooled during the press conference. At first, they will say something bullish to move the market up and the next movement they will say something dovish to drop the market. So, it’s better not to get in until it’s all over and clear.

Wait, What If They Don’t Hike The Rate?

We talked a lot about the rate hike, but what happens if the Fed surprises the market with no rate hike?

Well, my friends, I hope this happens today because it would be drastic for the greenback. This will be one of the best opportunities to sell the Buck and buy Gold for a long-term. Guys, I’m going to share Fed Rate based analysis on Forex & Commodities in a little while, so stay tuned for today’s hot trade setups.

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